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April 1, 2013

Taxes and the States: Which Take the Biggest Bites?

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Taxes are a necessary part of life. After all, what kind of society would we have without taxes? A volunteer police force? Firemen who devote their spare time to fighting fires? Obviously, we need to pay taxes so government can provide essential services.

But sometimes government reaches a bit far in its quest to find revenue. Since the 20th century, we've seen the size of government increase substantially and taxes have followed suit. In this post, we'll take a look at a few of the more esoteric sources of government revenue.

Hello....Operator!

One of the most prolific technological advances in recent years has occurred in the smart phone industry, a fact that hasn't escaped the watchful eye of our political leaders. As a result, states and many localities levy a tax on wireless services. The 10 states with the highest state and local tax rates are:

The Highest Wireless Levies

Nebraska

18.67%

Washington

18.62%

New York

17.85%

Florida

16.59%

Illinois

15.94%

Rhode Island

14.58%

Missouri

14.29%

Pennsylvania

14.13%

South Dakota

13.13%

Kansas

13.11%

The Lowest Wireless Levies

Oregon

1.85%

Nevada

2.13%

Idaho

2.28%

Montana

6.09%

Delaware

6.28%

Note: This tax rate is calculated by averaging the tax in the largest city and the capital city. The data is as of July 1, 2012. The average for all states is 10.12%.

Scratch This!

If you have been, or ever will be a winner of a lottery, you'll have to pay more than income tax on your winnings. In fact, each state keeps a portion of the winnings, outside the normal income taxes paid. The states with the highest "implicit lottery tax revenue per capita" as of fiscal year 2011 are: Delaware; Rhode Island; West Virginia; Oregon; New York; Massachusetts; South Dakota; New Jersey; Georgia, and Connecticut.

The Biggest Property and Sales Taxers

States have a mandate to balance their budgets each year. Which states and localities collect the majority of their revenue from property tax, sales tax and other sources? Here's the answer.

Property Tax as a Percentage of Total Tax Revenue

State

% of State & Local Tax Revenue

New Hampshire

64.6%

New Jersey

48.4%

Vermont

45.8%

Rhode Island

45.6%

Texas

45.2%

Two of the states listed have no state income tax (New Hampshire and Texas) and so it's no surprise that they rely more heavily on the property tax.

General Sales Tax as a Percentage of Total Tax Revenue

State

% of State & Local Tax Revenue

Hawaii

35.1%

Arizona

33.7%

Mississippi

31.8%

Oklahoma

31.6%

Florida

30.0%

Three of these are big tourist states (Arizona, Hawaii, and Florida).

Business Friendly?

Which states collect the least from businesses? There are four states that did not collect any tax from corporate income during fiscal year 2010. They are Wyoming, Nevada, Texas and Washington. Therefore, if you have a business, you might consider locating in one of these states.

The bottom line is that government is always looking for something to tax. I think President Reagan said it best, "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” A wise observation filled with truth!